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Addressing a motion to dismiss a bevy of antitrust allegations, the US District Court for the District of Massachusetts held that a class of purchasers had sufficiently pled allegations of “hard switch” product hopping. However, the court also held that the purchasers did not have standing to assert a claim for an allegedly anticompetitive reverse-payment settlement. In re Asacol Antitrust Litigation, 15-cv-12730 (Jul. 20, 2016) (Casper, J.)

The case related to the drugs Asacol®, Asacol HD® and Delzicol®, a family of drugs marketed by Warner Chilcott (now a subsidiary of Actavis) for the treatment of ulcerative colitis, an inflammatory bowel disorder. All three medications contain the same active ingredient, mesalamine. Asacol is a treatment approved to manage mild to moderately active ulcerative colitis, as well as a maintenance therapy for patients whose ulcerative colitis is in remission. Asacol HD is a higher dose of mesalamine, approved only for the treatment of moderately active ulcerative colitis. Delzicol is a redesigned version of Asacol that is identical except for a change in the outer capsule, which is covered by its own patent. Two separate sets of activities surrounding these medications give rise to the antitrust claims in this case.

Product Hopping Claims

The product hopping claim stems from Warner Chilcott’s decision to remove Asacol from the market shortly before its patent expiration and begin marketing Delzicol. Warner Chilcott asserted that this decision was based on guidance from the US Food and Drug Administration (FDA) about the dangers of dibutyl phthalate, a substance present in the coating of Asacol, but not Delzicol. The purchasers alleged that this was a pretext for pulling Asacol from shelves to destroy the market before generic entry.

The court ultimately decided that the purchasers had sufficiently pled a claim for monopolization under §2 of the Sherman Act. The purchasers asserted that Warner Chilcott possessed monopoly power in the mesalamine market and that pulling Asacol from the market was an improper attempt to maintain that power. Warner Chilcott put forward three arguments to the contrary, but the court was not convinced.

First, Warner Chilcott argued that its rationale for pulling Asacol based on FDA guidance should insulate it from antitrust claims. However, the purchasers sufficiently pled pretext allegations because the guidance was non-binding and did not justify completely pulling Asacol from the market and because Warner Chilcott continued to use it elsewhere.

Second, Warner Chilcott argued that the innovation represented by the patent covering Delzicol is inherently valuable to the public and thus should not trigger antitrust scrutiny. Despite this, the court held that there were plausible allegations that Warner Chilcott was using the patent not just for the limited monopoly it granted, but to extend its exclusivity period for its ulcerative colitis medication generally.

Finally, Warner Chilcott argued that its actions were a mere redesign of its product, which is consistent with competition. The court acknowledged that a healthy skepticism surrounds claims that a dominant firm’s product redesign was anti-competitive. Yet, the court still allowed the claim to proceed based on the unique circumstances of the pharmaceutical industry. The redesign removed Asacol from the marketplace, preventing generic substitution by pharmacists, which would have a significant impact on the market for generic Asacol.

Reverse Payment Claims

The reverse payment claims arose from separate litigation between Warner Chilcott and Zydus Pharmaceuticals related to an abbreviated new drug application (ANDA) Zydus filed for Asacol HD. The case ultimately settled under an agreement that gave Zydus two potential options for entering the market. First, Zydus could enter the market on November 15, 2015, with its own generic, provided that the FDA had approved Zydus’ ANDA by then. Zydus would have to pay Warner Chilcott a 25 percent royalty of its net sales, and Warner Chilcott would maintain the right to supply an authorized generic to another company. Alternatively, if the FDA did not approve the ANDA, Zydus would be allowed to sell an authorized generic starting on July 2, 2016. In exchange, Zydus would pay 75 percent of its profits to Warner Chilcott. As of the opinion’s publication, Zydus’ ANDA remains unapproved. The purchasers asserted that this settlement agreement amounted to an impermissible delay of Zydus’ entry into the market.

The court did not reach the issue of whether the pleading could survive a motion for failure to state a claim. Instead it held that the purchasers did not have standing to bring the claim. The court noted that the limiting factor for Zydus’ entry into the market was not the settlement, but approval by the FDA. As such, the settlement could not be said to delay entry since Zydus would be unable to sell generic Asacol HD even in its absence. The purchasers argued that the settlement made Zydus less likely to push for FDA approval, but the court found that they had not offered any plausible allegations to support that argument.

Compare jurisdictions:Life Sciences: Product Regulation and Liability

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